4 steps to making a budget

No one likes budgeting. It takes all the fun out of spending money. But to make sure you’re not left in a financial crisis, have a read of our how-to-budget guide.Â

Step one: How many pennies do you have to your name?

By which we mean: how much money comes into your account each month?

To find out, consider your different forms of income:

If you’re employed, whack open your pay-slip and note down how much you get after Mr Taxman has taken his bit away.

If youâre a student, divide up your student loan into months. Write it down somewhere in big numbers â add glitter-glue and stickers if you really want.

If you receive JSA or other benefits, keep a note of how much this is per month. Spreadsheets are your friend.

Step two: Where are the essential places your money has to go each month?

From your grand total, deduct those boring-but-essential things like shelter and food. The outgoings most of us have are:

Rent

Bills – including mobile, internet and TV license

Council tax

Food â work out how much you roughly spend a week and then multiply it by four (remember some months are longer than four weeks so this can only be a rough guide).

Travel to work/college

Student loan/credit card repayments

Step three: Life can throw curveballs, so plan for them

When youâre budgeting, itâs always worth factoring in an extra 10% of your essential outgoings per month as life loves kicking you in the ass financially. For instance, what if your car breaks down? Or itâs your mateâs birthday? Or some technical glitch means your bank doesnât transfer your pay cheque to your account? Itâs extremely important to have this 10% cushion â otherwise you risk being suddenly catapulted into a world of debt you havenât planned.

Step four: Anything left?

This figure is your monthly budget â your âdisposable incomeâ.

Itâs this leftover money you need to keep a beady eye on, as this is where youâre likely to overestimate how much you have. Â£70 a week might seem a lot to start with, but once youâve bought a round after work on Tuesday then a magazine and coffee on Wednesday then youâre already down to Â£55 and itâs not even the weekend yet.

Sometimes it helps you get a sense of how much you have by feeling the actual cash in your hand â one tip is to take out your weekly budget at the start of the week. Youâll soon get used to how much money you really have then. Best not wander about with all of it on you though, in case you get mugged or lose it.

Waitâ¦ can someone else do the maths for me?

Yes. There are lots of online tools that help you break down your spending. Here are some budget calculators weâd recommend:

Only have three minutes? This tool sorts out how much money you have after bills:

Feeling all responsible and in the mood for some life admin today? This more intense budget planner takes around 20 minutes and will really help you get a hold on your incomings and outgoings.

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What is Money for Life?

Money for Life is a three-year programme inspiring a generation to make the most of their money. From empowering you to feel confident and start talking openly about money to providing high-quality training and crucial support systems; Money for Life equips 16-25 year olds across the UK with the knowledge, life skills and provision needed to manage their money. The three-year programme is delivered by UK Youth and is funded by Lloyds Banking Group.